The future of Egypt’s automotive industry is now at the mercy of the national currency’s flotation and is subject to importers’ provision of foreign currency, Hassan Soliman, head of the Egyptian Automobile Manufacturers Association (EAMA), said following the Central Bank of Egypt’s (CBE) decision to float the Egyptian pound.
Soliman explained that the auto industry in Egypt is comprised of 40-50% of imported cars and car parts, while the rest are locally manufactured. Therefore, in the case that US dollar provisions for imports fail, the market will witness a total deficit due to the scarcity of cars, which will significantly increase car prices.
He added that dollar holders will bear an increase in custom tariffs as they are more capable of importing than others. The consumer will bear significant price hikes due to the higher customs fees and scarcity of cars, meaning that the phenomenon of overpricing will continue.
Overpricing describes price increases imposed by the merchant on the customer—instead of the official price of the car as defined by agents and companies. Merchants resort to overpricing due to the current scarcity of cars offered in the market.
Providing banks with foreign currency and opening the door for importers will raise the official price of cars, Soliman said. On the bright side, such a move would eliminate the phenomenon of overpricing as cars become more readily available.
Soliman explained that in the future a consumer looking to buy a car will only bear the official increase in prices—which is, of course, lower than what merchants may overcharge. If the foreign currency shortage continues and leads to the door on imports being locked, a real catastrophe will fall on those in the sector.
The lack of foreign currency in the next phase and banks purchase transactions will only raise local and imported car prices to an unexpected level, he concluded.